Microsoft Sues Student Software Sellers

(Redmond, Wash.) Microsoft Corp. has filed five new lawsuits against U.S. companies and individuals it claims sold deeply discounted Windows and Office software intended for students.

The company filed the suits Monday evening in federal courts in California, Nevada and Florida, alleging the parties infringed on Microsoft's copyright by importing and distributing versions of Windows and Office that were not meant to be sold through the retail channel.

"The defendants in these lawsuits and others are charged with profiting from selling clearly marked educational software to unsuspecting retail customers who were not licensed to use it," Bonnie MacNaughton, senior attorney at Microsoft, said in a statement.

Named in the lawsuits are EEE Business Inc., doing business as eBusZone.com; Eric Chan and Ruhui Li, both doing business as LCTech; and Intrax Group Inc. of California. Also named were Global Online Distribution LLC of Las Vegas and Big Boy Distribution of Florida.

"We're not selling counterfeit or stolen software," said Mike Mak, owner of Intrax, which is based in San Jose, Calif. "We bought software from legitimate sources in the U.S."

Mak said his company sold the discounted "Student Media" software, but stopped after Intrax learned about the lawsuit Tuesday morning.

"When we sell it, we disclose exactly what it is to our customers. We tell them it is academic software, that it may require a separate license," Mak said. He said that as far as he's concerned, that's not illegal.

He added that it's impossible for his business to sell boxed retail versions of Microsoft software and still make a profit. Instead, he said, "you try to seek out alternatives that are legal," including Student Media programs.

Dale Harelik, managing director of Global Online Distribution, said his company has never sold the discounted students-only software. He said the company received a cease-and-desist letter from Microsoft in January, and that he spoke by phone with the software maker's lawyers, who assured him Global Online Distribution was not a target of an ongoing investigation.

"We're not the bad guys," Harelik said. "We agreed with Microsoft. We complied with Microsoft."

Lillian Shan, a manager at EEE Business, said the company had not seen the legal filings, and did not want to comment without having reviewed them. Big Boy Distribution did not return a call for comment.

Microsoft has pinpointed a handful of companies, including one in Jordan and one in Latvia, as sources for the discounted Student Media software sold illegally on U.S. Web sites, MacNaughton said in an interview Monday.

These education-only copies of Office and Windows, which universities around the world buy from academic resellers and offer to students at a fraction of the retail price, are a prime target for fraud, MacNaughton said.

"We knew we had to try to do something to maintain the integrity of our academic programs," she said.

MacNaughton said Jordan-based Educational Solutions had a contract to sell 150,000 copies of Windows and Office to Jordan's education ministry. It received the software from Microsoft but never paid for it, she said. Instead, it resold the disks to software retailers in the U.S., making between $3 million and $4 million in profit.

MacNaughton said a company in Latvia perpetrated a similar scam, but declined to give the company's name.

Microsoft also said Monday that EDirectSoftware.com, which it claimed was one of the largest sellers of the discounted student software, agreed to settle a lawsuit out of court. EDirectSoftware.com said it no longer sells Microsoft products, but would not comment on the settlement.